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Presentation, discussion, and possible action regarding an award from the 2024 HOME American Rescue Plan Non-Congregate Shelter Invitation to Apply for Denton County Friends of the Family
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RECOMMENDED ACTION
recommendation
WHEREAS, the Governing Board approved publication of the 2024 HOME-ARP Non-Congregate Shelter Invitation to Apply (ITA) on July 11, 2024, which made available $56,511,877 (later amended to $64,005,338 in the Second Amendment) for the development of non-congregate shelters;
WHEREAS, the Department entered into a HOME American Rescue Plan (HOME-ARP) Contract with Denton County Friends of the Family on October 13,2025, for $439,292 in nonprofit capacity building/operating costs to support the organization while it prepared to apply for HOME-ARP Non-Congregate Shelter (NCS) funds reserved in the amount of $8,200,000;
WHEREAS, Denton County Friends of the Family submitted its application for Denton County Friends of the Family Justice Center Phase 2 for $8,200,000 on June 19, 2026; and
WHEREAS, HOME-ARP staff has reviewed the Application, prepared an NCS Project Analysis and recommends an award of up to $8,200,000 in HOME-ARP funding, which is the reserved amount;
NOW, therefore, it is hereby
RESOLVED, that the award of HOME-ARP NCS to Denton County Friends of the Family for up to $8,200,000 is hereby approved in the form presented at this meeting; and
FURTHER RESOLVED, that the Board’s approval is conditioned upon Denton County Friends of the Family’s satisfaction of all conditions of the NCS Project Analysis, and completion of any other reviews required to assure compliance with applicable rules and requirements and in accordance with the timeframe described herein.
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BACKGROUND
TDHCA was allocated $132,969,147 of funds from HUD under Section 3205 of the American Rescue Plan Act, which was later increased to $133,474,575 due to a HUD reallocation. HOME-American Rescue Plan (HOME-ARP) is designed specifically to address homelessness and while based off the HOME Program, HUD issued waivers and allowed new activities that varied from HOME annual funds as further provided for in the Community Planning and Development Notice 21-10 and Appendix (HUD 21-10). Non-congregate shelter (NCS) is one of the allowable activities under HOME-ARP; per HUD CPD Notice 21-10, an NCS is one or more buildings that provide private units or rooms as temporary shelter to individuals and families and does not require occupants to sign a lease or occupancy agreement. NCS must have, at minimum, units with a bathroom sink, toilet, bath and/or shower; smoke detector; carbon monoxide detector; and either unit kitchens/kitchenettes or a communal space with communal kitchens.
Currently the Department has $64 million of its HOME-ARP allocation programmed for NCS development. As reflected in its HOME-ARP Allocation Plan, as amended, NCS development funds will only be awarded to recipients who first receive HOME-ARP nonprofit capacity building and operating funds (NCO). In July 2024, the 2024 HOME-ARP NCS Invitation to Apply released $56,511,887 (later amended to $64,005,338) for NCS acquisition, construction, reconstruction, or rehabilitation of a HOME-ARP NCS. Occupants of the NCS must meet the definition of a HOME-ARP qualified population, which includes persons experiencing homelessness and other vulnerable populations.
For the 2024 HOME-ARP NCS ITA, the loan structure provides an interest rate as low as 0% with a deferred forgivable or deferred interest and principal permanent term, for 15 years for new construction.
The NCS activity is based loosely on rental development rules, with many waivers and alternative requirements to account for the differences between development and operation of a shelter and development and operation of a rental property. For example, in a shelter there is no rental income to support the operation of the shelter. As a result, NCS applications need to show the availability of alternative sources of operating funds other than rental income. HOME-ARP funds are ineligible to be used for shelter operating per HUD CPD Notice 21-10. Therefore, the Applicant was required to submit a plan for securing non-HOME-ARP sources of operating funds such as private, local, state, or federal funding sufficient for any operating gap associated with the NCS.
Because of the waivers and lack of rental income, NCS projects are not underwritten in the same way that rental projects are. The size, structure, and income requirements for the NCS vary from rental projects so that many of the tests of traditional multifamily underwriting do not apply. Therefore, for the NCS Applicants, a Project Analysis is prepared rather than an underwriting report.
In October 2025, the Department awarded Denton County Friends of the Family $439,000 in NCO funds, and reserved NCS funds for $8.2 million conditioned on submission of a viable NCS Application which was submitted in June 2026.
When possible, staff compared building and operating costs to permanent supportive housing developments (which may have larger common areas, and higher operating costs than general population rental housing) and compared operating costs to existing emergency shelters.
Based on the Project Analysis, staff is recommending approval of this HOME-ARP NCS activity.
|
App. ID |
Application Name |
Recommended HOME-ARP Award |
Project Type |
Source and Layering |
City |
|
26801 |
Friends of the Family Justice Center Phase II |
8,200,000 |
New Construction |
HOME-ARP |
Denton |
Application Number 26800: DCFOF Family Justice Center Phase II
Denton County Friends of the Family, a nonprofit 501(c)(3), is the proposed owner of Family Justice Center Phase II, in Denton, Texas, which is proposed to be a new construction NCS. The address of the proposed construction is 3050 N. Bonnie Brae Street, Denton, TX, on a parcel of land owned by Denton County Friends of the Family Realty Investments. The total cost of the proposed new construction is $8,846,555. Upon review of the Application, staff identified at least $8,200,000 million in HOME-ARP eligible costs, which is the recommended HOME-ARP award amount. The remaining funds in the amount of $646,555 will come from Denton County Friends of the Family, with shelter operating costs anticipated from its capital funds.
Description: Family Justice Center Phase II is a 25-unit new construction NCS with all units containing at least one bedroom and bathroom (Unit mix: eleven 1 bed/1 bath, ten 2 bed/2 bath, two 3 bed/2 bath, two 3 bed/3 bath.)
Denton County Friends of the Family’s Family Justice Center campus will be in Denton County, Texas. Family Justice Center Phase 2 will provide 25 NCS Units dedicated to HOME-ARP qualifying populations, including survivors of domestic violence and sexual assault. The Development is designed to provide safe, private, and service-enriched temporary shelter within a survivor-centered environment that promotes healing, safety, housing stability, and long-term self-sufficiency. The project will include a mix of one-bedroom, two-bedroom, and three-bedroom units to accommodate varying household sizes and needs (92% of usable space/net square footage). The development will also include a lobby, offices, multipurpose room, storage, restrooms, and a laundry (8% of usable space/net square footage).
The Family Justice Center Phase 2 will commit all 25 units for Qualified Populations (QPs) through the Federal Compliance Period of 15 years. Because shelters are not able to charge rent, there will be no fees for the residents. Denton County Friends of the Family will also be responsible for utilities.
Financing and Regulatory Terms: The $8,200,000 HOME-ARP Loan will be in first lien position with a 15-year term at 0% interest, and no amortization. If there is no non-compliance during this time period, this loan may be forgiven. The loan structure and details are located in Attachment A, Denton County Friends of the Family’s Family Justice Center Phase 2 NCS Project Analysis.
Having sufficient operating sources was key to showing financial feasibility for The Family Justice Center Phase 2 as required in HUD CPD Notice 21-10. Per HUD Notice 21-10, the Department was required to evaluate: (1) the appropriate skills and experience related to development of shelters or similar facilities, (2) prior experience operating shelters, (3) budget, timeline, and sources and uses, and (4) proposed operating budget, which if any gaps are identified includes a plan to secure additional private, local, state, or federal funding sufficient for successful operating of the project. These items and more were addressed in the Project Analysis.
Organizational Structure: The proposed borrower is Denton County Friends of the Family, which includes principals.
Risks and Mitigation: As listed in the Project Analysis, the risks and mitigation are restated below:
Risks and Risk Mitigation
In looking at the proposal for Denton County Friends of the Family overall, staff has identified several risks of proceeding and has provided comments on the potential mitigation of those risks.
o If Family Justice Center Phase 2 does not continue to operate as an emergency shelter during the Federal Compliance Period or if there is any other noncompliance with HUD regulations, then the full amount of the HOME-ARP loan would be due to be repaid by Denton County Friends of the Family and the loan foreclosed upon. The loan amount is not forgiven partially each year; it is forgiven only at the end of the Federal Compliance Period. If this were to transpire, foreclosure and repayment of funds may also jeopardize Denton County Friends of the Family other programs, since Denton County Friends of the Family is responsible for the entire amount of the repayment (e.g., no LLC or other entity was created to own the NCS). In the event of a foreclosure by TDHCA on the NCS buildings due to noncompliance, TDHCA would become the owner of the improvements. In this case, TDHCA would seek to identify an alternate nonprofit to take over the property.
• The majority of the operating funds are government grants and three of the four grants have shown steady funding over at least the last ten years. The diversity of operating funding sources lessens the likelihood that the shelter will be unable to operate.
o TDHCA is the major contributor of building funds at 92.7% of all costs.
• Family Justice Center Phase 2 is part of a replacement and expansion for Denton County Friends of the Family existing congregate shelter with 32 beds. As such, the funds used to currently support the existing congregate shelter will be partly used for Family Justice Center Phase 2.
Conditions
To address outstanding issues and to mitigate risk, the following conditions will be placed on the award.
Condition prior to Contracting
1. Environmental clearance should be complete within 90 days of award.
Conditions in the Contract
Throughout the Contract term, Denton County Friends of the Family must meet the requirements in the Contract.
1. If the conditions prior to closing are not met within the specified deadlines or if no deadline is specified 12 months from award, then the award amount may be revised, or the award may be rescinded at the Department’s sole discretion.
2. If Department review of Davis Bacon and Related Acts requirements results in required corrections, Denton County Friends of the Family will make the requested corrections timely. If requested labor standard corrections (if any) are not made by the sixth draw or within six draws of the labor standards correction requests, then funds will be held until the corrections on the previous draws have been made.
Conditions before Closing
Prior to closing the HOME-ARP NCS loan, Denton County Friends of the Family will submit:
1. Updated application exhibits: Operating Expenses, Development Cost Schedule, Schedule of Sources, and documentation necessary to support any changes from previous review.
2. Substantially final construction contract between Denton County Friends of the Family and its contractor with Schedule of Values.
3. Quotes from property insurers to support the estimated annual amount of insurance.
4. A Shelter Manual or other document that shows occupancy admission requirements that allows for access to HOME-ARP’s Qualified Populations.
5. Executed estoppel letters or certificates from each and every lienholder on the Property providing the current status of each prior loan, if other loans are included in the final financing.
6. Fidelity Bond Insurance and Payment and Performance Bond.
7. Environmental mitigation plans as identified during environmental clearance.
8. Letter from an attorney outlining the tax code under which Denton County Friends of the Family has an anticipated tax exemption on the improvements, including the percentage of the tax exemption.
9. Denton County Friends of the Family annual budget showing commitments to pay for NCS operating expenses for at least a two-year period of operations after project completion. Sources and firm commitments must be reaffirmed at project completion.
10. Title Policy in the amount of the loan reflecting TDHCA as an additional insured.
11. Proof of subdividing the site or provide a metes and bounds survey, and proof of access to the site, so that only Family Justice Center Phase 2 would be subject to the Land Use Restriction Agreement.
Should any terms of the proposed capital structure change or if there are material changes to the overall development plan or costs, the analysis will be re-evaluated and adjustment to the terms of TDHCA funds may be warranted.
Recommendation
HOME-ARP staff recommends an award of up to $8,200,000 in the form of a Deferred Forgivable HOME-ARP construction to permanent loan at 0% interest and a 15-year permanent term, dependent on Denton County Friends of the Family meeting the conditions